>^m:^^^m 


UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


TREASURY  DEPARTMENT 

UNITED  STATES  INTERNAL  REVENUE 


V^i5.      Jvi"bvvvl    Ptv/wu«  5"*rvi^v, 

REGULATIONS  53 


RELATING  TO  THE 


TAX  ON  SOFT  DRINKS,  ICE 
CREAM  AND  SIMILAR  ARTICLES 
SOLD  AT  SODA  FOUNTAINS  OR 
SIMILAR    PLACES  OF  BUSINESS 


UNDER  TH3 


REVENUE  ACT  OF  1918 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

191? 


s 

19)9 


s^ 


REGULATIONS 

KEl.ATING    TO    THE 

TAX  ON  SOFT  DRINKS,  ICE  CREAM  AND  SIMILAR  ARTICLES 
OF  FOOD  OR  DRINK  SOLD  AT  SODA  FOUNTAINS 
OR  SIMILAR  PLACES  OF  BUSINESS. 

UNDER 

SECTION  630.  TITLE  VI,  OF  THE  REVENUE  ACT  OF  1918. 

[rublic,  No.  254,  65th  Congress.     H.  R.  12863. j 

Page. 

Table  of  Con  tents 5 

Part  I.  Tax  on  S-oft  Drinks,  Ice  Cream  and  Similar  Articles  of  Food  or 

Drink 6 

II.  Administrative  and  General  Provisions 9 

Index 14 

llc606°— 19  3 


PART  I. 
TAX  ON  SOFT  DRINKS,  ICE  CREAM  AND  SIMILAR  ARTICLES. 

[The  seclion  numbers  refer  to  the  statute  and  the  article  numbers  to  the  regulations.] 

Page; 
Section  630.  Soft  drinks  compounded  or  mixed  at  the  place  of  business, 

and  ice  cream 6 

Article  1.  Effective  date 6 

2.  ^^^lO  is  a  vendor 6 

3.  Rate  oUax 6 

4.  Place  of  business .,.. 7 

5.  Consumption  at  place  of  business 7 

6.  Beverages  taxable 7 

7.  Articles  taxable:  Examples 8 

8.  Beverages  not  taxable:  Examples 8 

9.  Beverages  not  taxable:  Medicinal 8 


PART  II. 
ADMINISTRATIVE  AND  GENERAL  PROVISIONS. 

Section  630.  Tax  paid  by  purchaser 9 

Article  10.  Payment  of  tax 9 

11.  Collection  and  return  of  tax 9 

Section  1305.  Extension  of  existing  statutes 9 

Article  12.  Aids  to  collection  of  tax 10 

Section  1314.  Medium  of  payment  of  tax 10 

Article  13.  Payment  of  tax  by  uncertified  checks 10 

14.  Procedure  with  respect  to  dishonored  checks 10 

Section  13*S.  Penalties 11 

Article  15.  Penalty  for  nonpaj'ment  of  tax 11 

16.  Penalty  for  failure  to  make  and  for  false  return 12 

Section  1319.  Misrepresentation  of  tax 12 

Article  17.  Misrepre.sentation  of  tax 12 

Section  1310  (a)  and  (b).  Credits  and  refunds 13 

Article  18.  Credits  and  refunds 13 

Section  1309.  Authority  for  regulations 13 

Article  19.  Promulgation  pf  regulations 13 

5 


PART  I. 
TAX  ON  SOFT  DRINKS,  ICE  CREAM  AND  SIMILAR  ARTICLES. 

SOFT    DRINKS    COMPOUNDED    OR    MIXED    AT    THE    PLACE    OF 
BUSINESS,  AND  ICE  CREAM. 

Sec.  C30.  That  on  and  after  May  1,  1919,  there  shall  be  levied,  assessed, 
•  collected,  and  paid  a  tax  of  1  cent  for  each  10  cents  or  fraction  thereof  the 
amount  paid  to  any  person  conducting  a  soda  fountain,  ice-cream  parlor,  or 
other  similar  place  of  business,  for  drinks,  commonly  known  as  soft  drinks, 
compounded  or  mixed  at  such  place  of  business,  or  for  ice  cream,  ice-cream 
sodas,  sundaes,  or  other  similar  articles  of  food  or  drink,  when  any  of  the  above 
are  sold  on  or  after  such  date  for  consumption  in  or  in  proximity  to  such 
place  of  business. 

Article  1.  Effective  date. — The  tax  is  upon  soft  drinks  com- 
pounded or  mixed  at  the  place  of  biisinass  and  upon  ice  cream, 
ice-cream  sundaes,  and  similar  articles  sold  at  soda  fountains,  ice- 
cream parlors,  and  similar  places  of  business  on  or  after  May  1,  1919. 

Art.  2.  Who  is  a  vendor. — -For  the  purpose  of  the  tax  and  as  used 
in  these  regulations  the  term  "vendor"  means  an  individual,  part- 
nership, association,  or  corporation  engaged  in  the  business  of  selling 
any  of  the  articles  enumerated  in  section  630  to  a  purchaser  for  con- 
sumption. Thus,  a  vendor  may  be  a  manufacturer,  jobber,  whole- 
saler^  retailer,  trustee  in  bankruptcy,  receiver  or  peddler. 

Art.  3.  Rate  of  tax. — The  tax  is  measured  by  the  price  for  which 
the  drink  or  food  is  sold.  It  is  on  the  actual  sales  price  at  the  rate 
of  1  cent  for  each  10  cents  or  fraction  thereof  of  the  amount  paid 
for  any  of  the  articles  mentioned  in  section  630.  Each  sale  for  10 
cents  or  l«ss  is  taxed  1  cent  and  every  sale  for  over  10  cents  is  taxed 
1  cent  for  each  10  cents  or  fraction  thereof  ol  the  price.  The  tax  is 
upon  the  whole  amount  of  the  price  paid  by  the  purchaser.  When 
several  articles  are  the  subject  of  a  single  sale,  the  total  price  paid 
is  the  miit  for  computing  the  tax.  Thus,  if  the  purchaser  orders 
two  sodas  at  the  same  time,  each  selling  for  15  cents,  the  tax  is  3 
cents  and  not  4  cents.  If,  however,  he  buys  one  soda  for  15  cents 
the  tax  is  2  cents  and  if  he  purchases  another  15-cent  drink  the  tax 
is  2  cents  on  the  second  sale.  Any  means  by  which  separate  pur- 
chasers pool  their  orders  for  the  purpose  of  defeating  or  escaping  the 
tax  imposed  by  section  630  shall  be  carefully  guarded  against  by 
the  vendor,  for  its  employment  subjects  the  purchaser  and  the 
vendor  (if  he  connives  at  it)  to  the  penalties  provided  in  section 
1308  of  the  Act.     See  articles  15-17. 

6 


TAET  I — SOFT  DRINKS^  ICE  CREAM  AND  SIMILAR  ARTICLES.  7 

Art.  4.  Place  of  business. — Tlio  tax  is  upon  the  price  of  certain 
commodities  "paid  to  any  person  conducting  a  soda  fountain,  ice- 
cream parlor,  or  other  similar  place  of  business."  The  words  "other 
similar  place  of  business"  refer  primarily  to  the  character  of  the 
business  transacted  rather  than  to  any  physical  resemblance  to  the 
place  where  such  business  is  done.  Whether  a  person  selhng  the 
above  described  articles  is  conducting  a  place  of  business  similar  to 
a  soda  fountain  or  ice-cream  parlor  is  a  question  dependent  on  the 
facts  in  each  particular  case.  Sales  of  soft  drinks,  ice  cream  and 
similar  articles  by  individuals  or  organizations,  such  as  religious, 
educational  or  charitable  societies,  on  special  occasions  only,  as 
church  festivals,  social  parties,  etc.,  are  not  taxable;  such  sales  in 
stands  and  booths  at  agricultural  fairs,  racing  parks,  public  exhibi- 
tions, circuses,  shows  and  similar  places  are  taxable.  The  distinction 
is  between  sales  made  by  a  person  conducting  a  place  of  business, 
even  though  temporarily,  and  merely  incidental  sales  which  can  not 
properly  be  considered  "business."  Sales  of  soft  drinks,  ice  cream 
and  similar  articles  of  food  or  drink  are  not  taxable  when  made  in  the 
regular  course  of  business  at  a  hotel,  restaurant,  cafeteria,  lunch  room 
or  club  house,  unless  such  articles  are  sold  separate  and  apart  from 
meals.  Any  sales  of  soft  drinks,  ice  cream  and  similar  articles  sold 
from  a  soda  fountain  are  taxable  even  though  sold  as  a  part  of  a  meal. 

Art.  5.  Consumption  at  place  of  business. — The  above  section  pro- 
vides that  the  tax  shall  be  levied  upon  the  sale  of  "soft  drinks,  ice 
cream,  ice-cream  sodas,  sundaes,  or  other  similar  articles  of  food  or 
drink,  when  *  *  *  sold  *  *  *  for  consumption  in  or  in 
proximity  to  such  places  of  business."  Wlien  any  of  the  specified 
articles  are  sold  in  such  containers  or  under  such  conditions  as  to 
indicate  that  they  would  ordinarily  be  consumed  in  or  in  proximity 
to  the  place  of  business  they  are  taxable.  Sales  of  ice  cream  in  cones 
are  taxable.  When  ice  cream  or  any  similar  article  is  sold  under 
conditions  which  indicate  that  it  usually  would  be  consumed  at  or 
in  proximity  to  the  premises  the  fact  that  the  purchaser  does  not 
consume  it  there  but  carries  it  away  does  not  render  it  free  from  tax. 
When  soft  drinks,  ice  cream  or  similar  articles  of  drink  or  food  are 
sold  to  be  carried  away  for  consumption  at  a  place  not  in  proximity 
to  the  place  of  business,  such  drink,  ice  cream,  or  food,  being  placed 
in  containers  of  a  kind  ordinarily  used  to  convey  the  articles  indicated, 
the  sales  are  not  taxable. 

Art.  6.  Beverages  taxable. — In  general,  such  beverages  as  are 
commonly  known  as  soft  drinks  which  are  compounded  or  mixed  at 
the  fountain  where  sold  are  subject  to  the  tax.  Beverages  sold  at 
the  fountain,  ready  for  consumption,  from  a  bottle  or  closed  container 
on  which  a  tax  has  been  paid  under  section  628  of  the  Revenue  Act 
of  1918  are  not  subject  to  the  tax. 


8  REGULATIONS — TAX  IMPOSED  BY  SECTION   630. 

Art.  7.  Articles  taxable:  Examples.— The  following  articles  of 
food  or  drink  arc  subject  to  tax  within  the  meaning  of  section  630 
of  the  Revenue  Act  of  1918:  all  ])everages  when  compounded  or 
mixed  at  the  fountain,  such  as  orangeade,  lemonade,  pineapple  juice, 
coca  cola,  root  beer,  moxie,  phosphates,  fruit  and  flavoring  sirups 
compounded  or  mixed  with  plain  or  carbonated  water,  milk  shakes 
in  any  form,  malted  milk  shakes  in  any  form,  cream  and  egg  shakes, 
ice  cream,  ice-cream"  sodas,  ice-cream  sundaes,  ice-cream  sand- 
wiches, flavored  ices  and  all  other  similar  drinks  or  foods  not  enu- 
merated or  specified  under  articles  8  and  9.  This  list  is  not  intended 
or  considered  to  be  complete  but  merely  illustrative  of  the  class  of 
articles  subject  to  tax. 

Art.  8.  Beverages  not  taxable :  Examples. — There  are  certain 
drinks  which  are  often  sold  at  soda  fountains,  ice-cream  parlors  or 
similar  places  of  business  which  are  not  regarded  as  soft  drinks, 
ice-cream  products  or  similar  articles  of  drink  or  food  within  the 
meaning  of  section  630  of  the  Revenue  Act  of  1918.  Such  beverages 
consist  of  such  articles  as  hot  beef  tea,  coffee  (liot,  cold,  or  iced),  tea 
(hot,  cold,  or  iced),  buttermilk,  milk,  hot  chocolate  or  cocoa,  hot 
clam  broth,  hot  clam  bisque,  hot  tomato  bisque  and  hot  tomato 
bouillon.  No  tax  applies  on  the  sale  of  beverages  or  drinks,  such 
as  ginger  ale,  root  beer,  moxie,  mmeral  water,  etc.,  when  served 
directly  from  a  closed  container,  in  which  case  the  manufacturer's 
tax  on  such  drinks  has  already  been  levied.  See  section  628  of  the 
Revenue  Act  of  1918.  However,  if  any  of  the  drinks  or  beverages 
herein  mentioned  are  compounded  or  mixed  with  carbonated  water, 
flavors,  or  other  ingredient  at  the  fountain,  they  are  taxable. 

Art.  9.  Beverages  not  taxable:  Medicinal. — There  are  certain 
medicines,  such  as  bromo  seltzer,  citrate  of  magnesia,  rochelle  salts, 
seidlitz  powders,  bicarbonate  of  soda,  castor  oil,  epsom  salts  and 
essence  of  pepsin,  which  are  often  sold  at  soda  fountains,  ice-cream 
parlors  and  similar  places  of  business,  which  are  not  soft  drinks  or 
ice-cream  products  or  similar  articles  of  food  or  drink,  and  hence  are 
not  taxable. 


PART  II. 
ADMINISTRATIVE  AND  GENERAL  PROVISIONS. 

TAX  PAID  BY  PURCHASER. 

[S;^c.  030.]  *  *  *  Such  tax  shall  be  paid  by  the  purchaser  to  the  vendor 
at  the  time  of  the  sale  and  shall  be  collected,  returned,  and  paid  to  the 
United  States  by  such  vendor  in  the  same  manner  as  pro\'ided  in  section  502. 

Art.  10.  Payment  of  tax. — The  tax  is  upon  the  sale  and  must  be 
paid  at  the  time  of  sale  by  the  purchaser  to  the  vendor. 

Art.  11.  Collection  and  return  of  tax. — The  tax  imposed  must  be 
paid  by  the  purchaser  to  the  vendor  and  the  vendor  must  make 
return  under  oath,  in  duplicate,  and  pay  the  tax  so  collected  to  the 
collector  of  the  district  in  which  his  principal  place  of  business  is 
located,  on  or  before  the  last  day  of  each  month  for  the  business 
done  during  the  precedmg  month.  Daily  records  shall  be  kept  by 
the  proprietors  or  their  agents  in  charge,  showing  the  number  of 
sales  (grouped  according  to  amount  of  sale)  and  the  tax  paid  thereon. 
The  daily  records  of  the  proprietors  or  their  agents,  with  copies 
of  their  monthly  returns,  shall  be  kept  on  file,  in  the  places  of  business 
of  such  proprietors,  in  such  manner  as  to  be  readily  accessible 
to  investigatmg  internal  revenue  officers.  In  case  the  proprietor  of 
a  soda  fountain,  ice-cream  parlor  or  similar  place  of  business  does 
not  use  an  adequate  cash  register  or  check  system  from  which  daily 
aiKl  monthly  records  may  be  kept,  a  separate  receptacle  shall  be  used 
to  retain  the  tax  collected  by  the  vendor  from  the  pm'chaser.  .Such 
receptacle  shall  be  so  arranged  or  subdivided  into  compartments 
suitable  for  holding  tlie  difi"erejit  amounts  of  tax  collected,  in  order 
to  facilitate  the  compilation  of  the  daily  and  monthly  records  of  tax 
collection. 

EXTENSION  OF  EXISTING  STATUTES. 

Sec.  ]305.  That  all  administrative,  special,  or  stamp  provisions  of  law, 
including  the  law  relating  to  the  assessment  of  taxes,  so  far  as  applicable, 
are  hereby  extended  to  and  made  a  part  of  this  Act,  and  every  person  liable 
to  any  tax  imposed  by  this  Act,  or  for  the  collection  thereof,  shall  keep  such 
records  and  render,  under  oath,  such  statements  and  returns,  and  shall 
comply  with  such  regulations  as  the  Commissioner,  with  the  approval  of  the 
Secretary,  may  from  time  to  time  prescribe. 

Whenever  in  the  judgment  of  the  Commissioner  necessary  he  may  require 
any  person,  by  notice  served  upon  him,  to  make  a  return  or  such  statements 
as  he  deems  sufficient  to  show  whether  or  not  such  person  is  liable  to  tax. 

The  Commissioner,  for  the  purpose  of  ascertaining  the  correctness  of  any 
return  or  for  the  purpose  of  making  a  return  where  none  has  been  made,  is 

9 


10  REGULATIONS — TAX  IMPOSED  BY  SECTION  630. 

hereby  authorized,  l>y  any  revenue  a.^ent  or  inspector  designated  hy  him 
for  that  purpose,  to  examine  any  books,  papers,  records  or  memoranda 
bearing  upon  the  matters  required  to  be  inchided  in  the  return,  and  may 
require  the  attendance  of  the  person  rendering  the  return  or  of  any  officer 
or  employee  of  such  person,  or  the  attendance  of  any  other  person  having 
knowledge  in  the  premises,  and  may  take  his  testimony  with  reference  to 
the  matter  required  by  law  to  be  included  in  such  return,  with  power  to 
administer  oaths  to  such  person  or  persons. 

Art.  12.  Aids  to  collection  of  tax. — In  collecting  the  tax  the  Com- 
missioner has  the  benefit  of  all  existing  internal  revenue  laws.  In 
aid  of  the  enforcement  of  the  statute  the  Commissioner  may  require 
any  person  to  keep  specified  records,  to  render  returns  and  state- 
ments as  directed,  to  submit  himself  and  his  books  to  examination 
and  to  comi)ly  with  such  regulations  as  may  be  prescribed. 

MEDIUM  OF  PAYMENT  OF  TAX. 

Sec.  1314.  That  collectors  may  receive,  *  *  *  uncertified  checks  in 
payment  of  *  *  *  taxes  payable  other  than  by  stamp,  during  such 
time  and  under  such  regulations  as  the  Commissioner,  with  the  approval 
of  the  Secretary,  shall  prescribe;  but  if  a  check  so  received  is  not  paid  by 
the  bank  on  which  it  is  drawn  the  person  by  whom  such  check  has  been 
tendered  shall  remain  liable  for  the  payment  of  the  tax  and  for  all  legal 
penalties  and  additions  the  same  as  if  such  check  had  not  been  tendered. 

Art.  13.  Payment  of  tax  by  uncertified  checks. — Collectors  may 
accept  uncertified  checks  in  payment  of  taxes,  provided  such  checks 
are  collectible  at  par;  that  is,  for  their  full  amount,  without  any 
deduction  for  exchange  or  other  charges.  The  collector  will  stamp 
on  the  face  of  each  check  before  deposit  the  words,  "This  check  is  in 
payment  of  an  obligation  to  the  United  States  and  must  be  paid  at 
par.  No  protest,"  with  his  name  and  title.  The  day  on  which  the 
collector  receives  the  check  wiU  be  considered  the  date  of  payment  so 
far  as  the  taxpayer  is  concerned,  miless  the  check  is  returned  dis- 
honored. If  one  check  is  remitted  to  cover  two  or  more  persons' 
taxes,  the  remittance  must  be  accompanied  by  a  letter  of  transmittal 
stating  (o)  the  name  of  the  drawer  of  the  check;  (6)  the  amount  of 
the  check;  (c)  the  amount  of  any  cash,  money  order,  or  otiior  instru- 
ment included  in  the  same  remittance;  (d)  the  name  of  each  person 
whose  tax  is  to  be  paid  by  the  remittance;  (e)  the  amount  of  the  pay- 
ment on  account  of  each  person;  and  (/)  the  kind  of  tax  p  ad. 

Art.  14.  Procedure  with  respect  to  dishonored  checks. — If  the  bank 
on  which  any  such  check  is  drawn  should  refuse  to  pay  it  at  par, 
the  check  should  be  returned  through  the  depositary  bank  and  be 
treated  in  the  same  manner  as  a  bad  check.  All  expenses  incident  to 
the  attempt  to  collect  such  a  check  and  the  return  of  it  through  the 


PART  II — ADMINISTRATIVE  AND  GENERAL  PROVISIONS.  11 

depositary  bank  must  be  paid  by  the  (Irawcr  of  the  check  to  the  bank 
on  which  it  is  drawn,  since  no  deduction  can  be  made  from  amounts 
received  in  payment  of  taxes.  See  section  3210  of  the  Revised  Stat- 
utes. If  any  taxpayer  whose  check  has  been  returned  uncollected  by 
the  depositary  bank  should  fail  at  once  to  make  the  check  good,  the 
collector  should  proceed  to  collect  the  tax  as  though  no  check  had 
been  given.  A  taxpayer  who  tenders  a  certified  check  in  payment  for 
taxes  is  also  not  released  from  his  obligation  until  the  check  has  been 
paid.     See  chapter  191  of  the  Act  of  March  2,  1911. 

PENALTIES. 

Sec.  1308.  (a)  That  any  person  required  under  Title  *  *  *  VI  *  *  * 
to  pay,  or  to  collect,  account  for  and  pay  over  any  tax,  or  required  by  law  or 
regulations  rnade  under  authority  thereof  to  make  a  return  or  supply  any 
information  for  the  purposes  of  the  computation,  assessment  or  collection  of 
any  such  tax,  who  fails  to  pay,  collect,  or  truly  account  for  and  pay  over  any 
such  tax,  make  any  such  return  or  supply  any  such  information  at  the  time 
or  times  required  by  law  or  regulation  shall  in  addition  to  other  penalties 
provided  by  law  be  subject  to  a  penalty  of  not  more  than  $1,000. 

(6)  Any  person  who  willfully  refuses  to  pay,  collect,  or  truly  account  for 
and  pay  over  any  such  tax,  make  such  return  or  supply  such  information  at 
the  time  or  times  requii-ed  by  law  or  regulation,  or  who  \villfully  attempts  in 
any  manner  to  evade  such  tax  shall  be  guilty  of  a  misdemeanor  and  in  addic- 
tion to  other  penalties  provided  by  law  shall  be  fined  not  more  than  $10,000, 
or  imprisoned  for  not  more  than  one  year,  or  both,  together  with  the  costs  of 
prosecution. 

(c)  Any  person  who  willfully  refuses  to  pay,  collect,  or  truly  account  for  ' 
and  pay  over  any  such  tax  shall  in  addition  to  other  penalties  provided  by 
law  be  liable  to  a  penalty  of  the  amount  of  the  tax  evaded,  or  not  paid, 
collected  or  accounted  for  and  paid  over,  to  be  assessed  and  collected  in  the 
same  manner  as  taxes  are  assessed  and  collected:  Provided,  howerer,  That  no 
penalty  shall  be  assessed  under  this  subdivision  for  any  offense  for  which  a 
penalty  may  be  assessed  under  authority  of  section  3176  of  the  Revised 

Statutes,  as  amended, 
******  * 

(rf)  The  term  "person"  as  used  in  this  section  includes  an  officer  or  em- 
ployee of  a  corporation  or  a  member  or  employee  of  a  partnership,  who  as 
such  officer,  employee,  or  member  is  under  a  duty  to  perform  the  act  in 
respect  of  which  the  violation  occurs. 

Art.  15.  Penalty  for  nonpayment  of  tax. —  (a)  Any  person  who  fails 
to  pay  the  tax  when  due  and  payable  is  liable  to  a  penalty  of  $1,000. 
If  he  willfully  refuses  to  pay  or  willfully  attempts  to  evade  the  tax, 
he  is  also  liable  to  a  fine  of  $10,000  and  costs  and  to  imprisonment 
for  one  year.  (b)  Any  officer  or  employee  of  a  corporation  or  a 
member  or  employee  of  a  partnership  who  in  the  course  of  liis  duty 
fails  to  pay  or  collect  the  tax  when  due  and  payable  is  liable  to  a 
penalty  of  $1,000.  If  he  willfully  refuses  to  pay  or  collect  or  will- 
fully attempts  to  evade  the  tax,  he  is  also  liable  to  a  fine  of  $10,000 
and  costs  and  to  imprisonment  for  a  year,  and  to  a  penalty  of  the 


12  r.EGULATIOlSrS — TAX  IMPOSED  BY  SECTION  630. 

amount  of  the  tax  unpaid  or  evaded.  Section  502  of  the  Revenue 
Act  of  1918  also  provides: 

If  the  tax  is  not  paid  when  due,  there  shall  be  added  as  part  of  the  tax  a 
penalty  of  5  per  centum,  together  vrith  interest  at  the  rate  of  1  per  centum 
for  each  full  month,  from  the  time  when  the  tax  became  due. 

Accordingly,  if  any  person  liable  to  pay  any  taxes  neglects  or 
refuses  to  pay  them  when  duo,  it  shall  be  lawful  for  the  collector 
or  his  deputy  to  collect  such  taxes  with  5  per  cent  additional  and 
interest  at  12  per  cent  per  annum. 

Art.  16.  Penalties  for  failure  to  make  and  for  false  return.— (a)  Any 
person  who  fails  to  make  a  rotum  at  the  required  time  is  liable  to  a 
penalty  of  SI, 000.  If  he  willfully  refuses  to  make  a  return  he  is  also 
liable  to  a  fme  of  $10,000  and  costs,  (b)  Any  officer  or  employee  of 
a  corporation  or  a  member  or  employee  of  a  partnership  who  in  the 
course  of  his  duty  fails  to  make  a  return  at  the  required  time  is 
liable  to  a  penalty  of  $1,000.  If  he  wilKully  refuses  to  make  a  return 
he  is  also  liable  to  a  fine  of  $10,000  and  costs  and  to  imprisonment 
for  a  year,  (c)  Section  3176  of  the  Revised  Statutes,  as  amended  by 
section  1317  of  the  Revenue  Act  of  1918,  also  provides: 

In  case  of  any  failiu-e  to  make  and  file  a  return  or  list  within  the  time  pre- 
scribed by  law,  or  prescribed  by  the  Commissioner  of  Internal  Revenue  or 
the  collector  in  pursuance  of  law,  the  Commissioner  of  Internal  Revenue 
shall  add  to  the  tax  25  per  centum  of  its  amount,  except  that  when  a  return 
is  filed  after  such  time  and  it  is  shown  that  the  failure  to  file  it  was  due  to  a 
reasonable  cause  and  not  to  willful  neglect,  no  such  addition  shall  be  made 
to  the  tax.  In  case  a  false  or  fraudulent  return  or  list  is  willfully  made,  the 
Commissioner  of  Internal  Revenue  shall  add  to  the  tax  50  per  centum  of  ita 
amount. 

The  amount  so  added  to  any  tax  shall  be  collected  at  the  same  time  and  in 
the  same  manner  and  as  part  of  the  tax  unless  the  tax  has  been  paid  before 
the  discovery  of  the  neglect,  falsity,  or  fraixd,  in  which  case  the  amount  so 
added  shall  be  collected  in  the  same  manner  as  the  tax. 

INIISREPRESENTATION  OF  TAX. 

Sec.  1319.  That  whoever  in  connection  with  the  sale  or  lease,  or  offer  for 
Bale  or  lease,  of  any  article,  or  for  the  purpose  of  making  such  sale  or  lease, 
makes  any  statement,  written  or  oral,  (1)  intended  or  calculated  to  lead  any 
person  to  believe  that  any  part  of  the  price  at  which  such  article  is  sold  or 
leased,  or  offered  for  sale  or  lease,  consists  of  a  t^ax  imposed  under  the  authority 
of  the  United  States,  or  (2)  ascribing  a  particular  part  of  such  price  to  a  tax 
imposed  imder  the  authority  of  the  United  States,  kno\ving  that  such  state- 
ment is  false  or  that  the  tax  is  not  so  great  as  the  portion  of  such  price  ascribed 
to  such  tax,  shall  be  guilty  of  a  misdemeanor  and  upon  con\'iction  tliereof 
shall  be  punished  by  a  fine  of  not  more  than  $1,000  or  by  imprisonment  not 
exceeding  one  year,  or  both. 

Aet,  17.  Misrepresentation  of  tax. — If  a  vendor  misrcprcr,ents  the 
tax,  he  is  guilt}'  of  a  misdemeanor  and  is  liable  to  a  fine  of  $1,000 
and  to  imprisonment  for  a  j'car.     This  provision  is  designed  among 


PAPvT   II ADMINISTRATIVE   AND   GENERAL   PROVISIONS.  13 

other  things  to  prevent  a  vendor  adding  more  than  tlie  amount  of 
the  tax  to  the  price  of  the  driak,  ice  cream,  or  similar  articles  of 
drink  or  food  sold  and  representing  that  the  increase  in  price  is  due 
to  the  tax.  If  the  sales  price  of  the  taxable  article  is  increased  to 
cover  the  tax,  the  tax  is  on  such  increased  sales  price,  but  where  the 
tax  is  collected  as  a  separate  item  it  is  not  to  })e  considered  as  an 
increase  in  the  sales  price. 

CREDITS  AND  REFUNDS. 

Sec.  1310.  (a)  That  in  the  case  of  any  overpaj'ment  or  overcollection  of 
any  tax  imposed  by  section  628  or  6^50,  *  *  -  the  person  making  such 
overpayment  or  overcollection  may  take  credit  therefore  against  taxes  due 
upon  any  monthly  return,  and  shall  make  refund  of  any  excessive  amount  col- 
lected  by  him  upon  proper  application  by  the  person  entitled  thereto. 

(b)  Wherever  in  this  Act  a  tax  is  requii'cd  to  be  paid  by  tlie  purchaser  to  the 
vendor  at  the  time  of  a  sate,  and  such  sale  is  made  on  credit,  then,  under  regu- 
lations prescribed  by  the  Commissioner,  with  the  approval  of  the  Secretary, 
the  t.ax  may.  at  the  option  of  the  vendor,  be  returnetl  and  paid  by  him  to  the 
United  States  as  if  paid  to  him  by  the  purchaser  at  tlie  time  of  the  sale,  and  in 
such  case  the  vendor  shall  have  a  right  of  action  in  any  court  of  competent 
jurisdiction  against  the  purchaser  for  the  amount  of  the  tax  so  returned  and 
paid  to  the  United  States. 

Art.  18.  Credits  and  refunds. — If  a  vendor  overpays  the  tax  due 
with  one  montlily  return,  he  may  take  credit  for  the  overpayment 
against  the  tax  due  with  a  succeeduig  return.  For  the  procedure 
with  reference  to  claims  for  refund  see  sections  3220  and  3225  of  the 
Kevised  Statutes,  as  amended  b}-  section  1316  of  the  Revenue  Act 
of  1918,  and  Regulations  No.  14  (revised).  When  a  tax  has  been 
illegally  or  erroneously  collecte<l  and  where  it  is  impossible  or  im- 
practicable for  the  taxpayer  to  take  credit  as  allowed  by  section 
1310,  above,  on  a  subsequent  monthly  return,  he  may  file  a  claim 
on  form  46,  to  be  obtained  from  the  collector,  for  refund  of  the 
amount  so  paid. 

AUTHORITY  FOR  REGULATIONS. 

Sec.  1309.  That  the  Commissioner,  with  the  approval  of  the  Secretary,  is 
hereby  authorized  to  make  all  needful  rules  and  regulations  for  the  enforce- 
ment of  the  provisions  of  this  Act. 

Art.  19.  Promulgation  of  regulations. — In  pursuance  of  the  statute 
the  foregoing  regulations  are  hereby  made  and  promulgated  and  all 
rulings  inconsistent  herewith  are  hereby  revoked. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue, 
Approved  May  3,  1919: 
Carter  Glass, 

Secretary  of  the  Treasury. 


INDEX. 


[Referonces  arc  to  arUcles.] 

Article. 

Agricultural  fairs.  taxaLiUty  of  sales  at 4 

Aids  to  collection  of  tax 12 

Authority  for  regulations 19 

Basis  of  tax 3 

Beef  tea,  taxability 8 

Beverages  taxable 6-8 

Bicarbonate  of  soda,  taxability 9 

Books  of  persons  liable  to  tax,  inspection 12 

Bottles,  taxability  of  beverages  in 6 

Bromo  seltzer,  taxability 9 

Buttermilk,  taxability 8 

Cafeterias,  taxability  of  sales  in  regular  course  of  business 4 

Carbonated  water,  taxability  of  beverages  mixed  with 8 

Castor  oil,  taxability 9 

Che  rk,  certified,  pa^-ment  of  tax 14 

Dishonored,  paym3nt  of  tax 14 

Uncertified,  payment  of  tax 13 

Chocolate,  taxability ,  8 

Church,  festivals,  taxability  of  sales  at 4 

Circuses,  taxability  of  sales  at 4 

Citrate  of  magnesia,  taxability 9 

Claims  for  refunds  of  tax 18 

Clam  broth  or  bisque,  taxability 8 

Closed  containers,  taxability  of  beverages  in 6 

Club  houses,  taxability  of  sales  in  regular  course  of  business 4 

Coca  cola,  taxability 7 

Cocoa,  taxability 8 

Coffee,  taxability 8 

Collection  of  tax I],  12, 15 

Computation  of  tax 3 

Cones,  taxability  of  ice  cream  in 5 

Consumption  at  place  of  business 5 

Corporate  officers  and  employees,  liability  for  failure  to  collect  or  pay  tax 15 

Liability  for  failure  to  make  return 16 

Cream  and  egg  shakes,  taxability 7 

Cream  tomato,  taxability -  8 

Credits  for  overpayment  of  tax IS 

Daily  records,  requirement 11 

Date  tax  effective 1 

Definitions: 

"Other  similar  place  of  business " 4 

"Vendor  " 2 

Dishonored  check,  payment  of  tax 14 

14 


INDEX.  15 

Article. 

Epsom  salts,  taxability 9 

Essence  of  pepsin,  taxability  .    9 

Exainplos  of  articles  taxable 7 

Articles  not  taxal)le 8,  9 

Expenses  incident  to  coHprting  check  in  payment  of  tax 14 

Fairs,  taxability  of  sales  at 4 

False  returns 16 

Flavored  ices,  taxa)>ility 7 

Fruit  and  flavoring  sirups,  taxa1)ility 7 

Ginger  ale,  taxability 8 

Hot  beef  tea,  taxability 8 

Hot  chocolate  or  cocoa,  taxability 8 

Hot  clam  broth  or  bisque,  taxability 8 

Hot  cream  tomato,  taxability 8 

Hot  tomato  bisque  or  ])ouillon,  taxability 8 

Hotels!,  taxability  of  sales  in  regular  course  of  liusino-j? 4 

Ice  cream,  taxability 7 

("ones,  taxability 5 

Sandwiches,  taxability 7 

Soda,  taxability 7 

Sundaes,  taxability 7 

Increase  of  ])rice  to  cover  tax 17 

Inspection  of  books  of  jjersons  liable  to  tax 12 

Lemonade,  taxability 7 

Letter  of  transmittal  accompanying  check  in  payment  of  tax 13 

Lunch  rooms,  laxability  of  sales  in  regular  coui-se  of  business 4 

Malted  milk,  taxability 7 

Medicinal  lieverages,  taxability 9 

Milk,  taxability 8 

Milk  shakes,  taxability 7 

Mineral  water,  taxability 8 

Misi'epresentation  of  tax - 17 

Moxie,  taxability '  ?  8 

Orangeade,  taxalnlity - 7 

"Other  similar  place  of  business."  delinition 4 

OvercoUection  of  tax.  refund 18 

Partnership  memliers  or  employees,  liability  for  failure  to  collect  or  pay  tax. .  15 

Liability  for  faihu-e  to  make  returns 16 

Payment  of  lax,  medium 13.  14 

Necessity 10. 11 

Penalty  for  nonpayment 17 

Time.' 10.11.13 

Penalties,  failure  to  make  return 16 

Misrepre.'^eul  ation  of  tax 17 

Nonpayment  of  tax l-^ 

Pepsin  essence,  taxability 9 

Person  liable  for  tax 10, 11 

Phosphates,  taxability 7 

Pineapple  juice  taxal  ility 7 

Place  of  business '* 

Consumption  of  articles  at 5 

Pooling  orders  to  evade  lax "^ 

Price  increased  to  cover  tax 17 


16  INDEX. 

Article. 

Public  exhiliitions,  taxal)ility  of  sales  at 4 

Purchasers'  liability  to  tax 10, 11 

Pacing  tracks,  taxability  of  sales  at 4 

Rate  of  tax 3 

Record.^,  reriuiring  taxpayer  to  keep 11, 12 

Refund  of  tax 18 

Restaurants,  taxability  of  sales  in  regular  course  of  business 4 

Returns,  necessity  and  requisites 11, 12 

Penalty  for  failure  to  make 16 

Time  for  making 11 

Rochclle  salts,  taxability 9 

Root  beer,  taxability 7,  S 

Seidlitz  powders,  taxability 9 

Several  articles  subject  of  single  sale 3 

Shows,  taxability  of  sales  at -  4 

Sirups,  taxability 7 

Social  parties,  taxability  of  sales  at -  4 

Soft  drinks  taxable C-8 

Special  occasions,  taxability  of  sales  on 4 

Sundaes,  taxability 7 

Tea,  taxability 8 

Time,  filing  return 11 

Payment  of  tax 10, 11, 13 

"WTien  tax  attaches 1 

Tomato  bisque  or  bouillon,  taxability 8 

Uncertified  check,  payment  of  tax 13 

Vendor,  definition 2 

Willful  refusal  to  make  return 16 

To  pay  tax 15 

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